Supreme Court

Participants in Defined-Benefit Retirement Plan Lack Standing to Sue Over Alleged Mismanagement

The Supreme Court shows a willingness to enforce limits on Article III standing.

|The Volokh Conspiracy |


Among the five opinions handed down today by the Supreme Court was Thole v. U.S. Bank, in which the Supreme Court concluded that participants in a defined-benefit retirement plan lacked Article III standing to sue the plan alleging it was mismanaged. As a consequence, the Court affirmed the dismissal of a putative class action by plan participants against U.S. Bank.

The case split the Court along traditional ideological lines, 5-4, as has often happened in cases concerning Article III standing and class action litigation. Justice Kavanaugh wrote for the Court. Justice Thomas concurred, joined by Gorsuch. Justice Sotomayor dissented, joined by the Court's three liberal justices.

Justice Kavanaugh explained why participants in a defined-benefit plan—as opposed to a defined-contribution plan—could not claim to have suffered a cognizable injury sufficient to confer standing.

Thole and Smith have received all of their monthly benefit payments so far, and the outcome of this suit would not affect their future benefit payments. If Thole and Smith were to lose this lawsuit, they would still receive the exact same monthly benefits that they are already slated to receive, not a penny less. If Thole and Smith were to win this lawsuit, they would still receive the exact same monthly benefits that they are already slated to receive, not a penny more. The plaintiffs therefore have no concrete stake in this lawsuit. To be sure, their attorneys have a stake in the lawsuit, but an "interest in attorney's fees is, of course, insufficient to create an Article III case or controversy where none exists on the merits of the underlying claim." . . . Because the plaintiffs themselves have no concrete stake in the lawsuit, they lack Article III standing.

As Justice Kavanaugh noted, although the plaintiffs could not allege any financial injury to themselves, they sought over $30 million in attorney's fees.

Justice Kavanaugh concluded his opinion:

Courts sometimes make standing law more complicated than it needs to be. There is no ERISA exception to Article III. And under ordinary Article III standing analysis, the plaintiffs lack Article III standing for a simple,  commonsense reason: They have received all of their vested pension benefits so far, and they are legally entitled to receive the same monthly payments for the rest of their lives. Winning or losing this suit would not change the plaintiffs' monthly pension benefits. The plaintiffs have no concrete stake in this dispute and therefore lack Article III standing. . . .

Justice Kavanaugh's opinion was quite brief: Eight pages. Justice Thomas authored a three-page concurrence, joined by Justice Gorsuch. Justice Sotomayor's dissent, on the other hand, was twenty-five pages long.

Justice Sotmayor's dissent began:

The Court holds that the Constitution prevents millions of pensioners from enforcing their rights to prudent and loyal management of their retirement trusts. Indeed, the
Court determines that pensioners may not bring a federal lawsuit to stop or cure retirement-plan mismanagement until their pensions are on the verge of default. This conclusion conflicts with common sense and longstanding precedent.

It concluded:

The Constitution, the common law, and the Court's cases confirm what common sense tells us: People may protect their pensions. "Courts," the majority surmises, "sometimes make standing law more complicated than it needs to be." Ante, at 8. Indeed. Only by overruling, ignoring, or misstating centuries of law could the Court hold that the Constitution requires beneficiaries to watch idly as their supposed fiduciaries misappropriate their pension funds. I respectfully dissent.

One reason this case is potentially significant is because it represents one of the more serious standing cases to reach the Court since the death of Justice Scalia, who was quite the standing hawk. The Court's refusal to find or expand an exception to Article III's injury requirement in ERISA or trust principles suggests that the Court still has five justices on the Court who would like to keep a tight leash on Article III. If so, it will be interesting to see how the Court handles the aggressive standing claims in the Texas ACA case, among other cases. After all, the plaintiffs in that case—like the plaintiffs here—suffer the same financial injury whether they win or lose: absolutely nothing.